SGX Freight Product Review – Q1 2016
OREANDA-NEWS. How quickly the first quarter of the year has flown by! Market conditions remained extremely challenging amidst severe oversupply coupled with weaker demand. At SGX we continue to deliver product enhancements to our Freight offering. Below is a review of the key highlights in recent months, as well as further product updates you can expect later this year. We hope the freight research articles (see below) are proving useful, and will be putting out more thematic polls to help build insight into market sentiment.
Growth in Liquidity on SGX
With your tremendous support – thank you! - SGX Freight ended the first quarter of the year with a majority share of cleared freight derivatives volume, and averaged well above 50% in March. This has been a reflection of huge industry support, and continued acquisition of new customers as we work to increase the pool of freight liquidity to the benefit of all our customers.
Product enhancements in Q1 2016
January: Clearing Fee Reduction
To help support market participants through unprecedentedly challenging conditions, SGX clearing fees have been permanently revised downwards to a flat rate of US$4.50 per lot for all full-day freight products (except Handysize Time Charter Average contracts, which have a flat rate of US$3.00 per lot). Fees for the Capesize Time Charter Average 5 Routes contracts were also waived until 30 June 2016.
February: C5 Futurisation and Strike Interval Changes to Freight Option-on-Swaps
The C5 (W.Australia to Qingdao) voyage route future was launched on 1 February. The contract specifications included a lowered Negotiated Large Trade size of two lots.
Amendment of all Freight Option-on-Swaps strike intervals to $1 was also implemented on 1 February, in line with their corresponding Option-on-Futures counterparts. The narrower strike intervals enable market participants to capture more specific trading opportunities.
March: Futurisation of P2A and P3A
2A and 3A voyage route futures were launched on 28 March. The contract specifications include a lowered Negotiated Large Trade size of two lots.
What else is coming in 2016
April: Extension of Options Series on Time Charter Average contracts
We hear you. On 25 April, SGX will be extending its options series on Time Charter Average contracts to five full calendar years, giving market participants the flexibility to trade further out contract years.
Q3 2016: Changes in Options Methodology
SGX will be enhancing its options calculation methodology from the current Black-76 model to the Turnbull-Wakeman model, to provide more accurate freight option prices.
Q4 2016: Launch of Tanker FFAs
Subject to regulatory approval, SGX will be launching FFA Tanker derivatives to provide customers with more hedging instruments.